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Last Updated on February 15, 2021 by Daniella
These days, the cost of living can feel astronomical. For one, the amount of money you need to buy your first house is not always easily achievable. Typically, your minimum down payment needs to be anywhere between 5% to 20% of a property’s overall purchase price.
Where you choose to buy can impact how much you’ll need. If you live in Los Angeles, the average cost of a home is $579,332, meaning you need to save at least $28,000 for a down payment. If you live in South Carolina, the average cost of a home is $193,491, meaning you need to save at least $10,000 for a down payment. All of this is to say – if you plan to buy your first house, the cost will vary.
Buying a house was always a priority for me growing up. But, when I was younger, I always assumed that it would be an affordable purchase. As I got older, it became a bleak reality to understand that homeownership is not as cost-effective as I once thought.
In Canada, home prices can be significantly higher than in the US. In the city I live – Calgary, Alberta – the average cost of a home is $475,000.
Knowing this, I knew my full-time income wouldn’t be enough to muster up a significant down payment. And so, enter the side hustle.
What is my side hustle?
Honestly, the better question is, “what isn’t included in your list of side hustles?” In 2015, I started my own personal finance blog, Mixed Up Money, to pay off my debt. Ever since starting the blog, I’ve grown that hobby into multiple income streams that help me pay my bills and save more money for my laundry list of financial goals.
There are a few different ways I make money, including but not limited to:
- Freelance writing
- Part-time marketing contracts
- Sponsored content on my website and social media platforms
- Affiliate marketing
I’ve made nearly six-figures in additional income working on my side hustles in the past six years. In my first year, I only made around $2,150 – but was delighted to earn an extra paycheck on the year. It took a while, but eventually, I started to build up a stable network of clients and a good reputation as a freelancer.
In 2019, I hit a new record of $40,000 after tax of side hustle income. That was the same year I bought my first home – and a significant chunk of my earnings went towards my down payment.
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How do I choose which side hustles make sense for me?
The thing with side hustles is that they can become time-consuming if you aren’t careful with how much you take on. As someone who has a full-time job and is also a mom, there used to be days when I felt overwhelmed and like I had made a mistake.
But after two years of learning how powerful saying no can be, I started to take on more side hustle opportunities that better aligned with my lifestyle. All it took to determine which side hustles fell in line with this was asking myself three questions:
- How much time can I invest?
- Is the pay enough?
- Can we make this partnership long-term?
If the project were going to be a 15-20 hour per week time commitment, it would mean that I’d be limiting the other work I could take on in addition to this job. Therefore, I’d question what the pay was and if it aligned with how much I would make doing one-off jobs on a more frequent basis. From there, it was defining whether this partnership would turn around to open more job opportunities and grow my network. If a project fell in line with these three questions, it was an easy yes. If not, I was comfortable saying no because it didn’t align with my values as a freelancer.
How did my side hustle income help me buy my first home?
Now you’re probably thinking to yourself: it’s amazing you could buy your first home, but what about the “how” behind how you did it? When I knew that buying a house was my top priority as far as savings goals went, I started to think about making achieving this goal easier.
I was putting away a small amount of each paycheck towards my savings account each month, for starters. And, as side hustle income was just additional ‘fun money’ for myself and my family to enjoy, we began putting all of that income into the same savings account.
But the critical trick that completely changed my situation was asking side hustle contracts to pay me in lumpsum payments rather than monthly. For me, money is psychological. Just like the reason I wanted to buy a home – for permanence and stability – how I manage my money is very emotional.
Each time I get money, especially money that isn’t allocated to any essential bills, I find it hard to resist spending that money in the heat of the moment. Even though I might not need that item as much as a long-term financial goal, it seems innocent enough because it’s such a low-cost purchase. But each of those low-cost purchases was adding up quite quickly.
So, instead, I realized it would be better to get one larger paycheck at the end of the term, especially since I didn’t need the money to pay for bills.
Why lumpsum payments were the way to go
Both contracts were over six months. If I had opted for monthly payments, I would have gotten $1,333 each month. This would be beneficial for long-term savings goals that I’d be interested in investing in the stock market, but because my savings goal was short-term, I knew the money would be sitting in a high-yield savings account regardless of when I got it.
After negotiating with my clients and having them agree to wait to pay me, I knew that I’d be able to finish off my down payment fund by June of 2019. I had two part-time marketing contracts, each worth $8,000, for a total of $16,000. In July 2019, we took possession of our first home.
Conclusion: What to remember
Ultimately, almost every side hustle has room for negotiation. Most of the talks will be with yourself. Is it worth the time? Is the price right? There are many questions you’ll need to ask yourself when you start a side hustle to avoid burning out.
Remember, just like with a full-time job; you have every right to negotiate with the person employing you – especially if this one negotiation will transform how you manage your finances completely.
Have any questions about first time home buying with side hustle income? Leave them in the comments below!
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- Should You Tell Your Employer About Your Side Hustle?
- How to Legally Cover Your Side Hustle
Alyssa is an award-winning personal finance blogger and founder of MixedUpMoney.com. She writes about being a mom, overcoming personal debts, and how to get away with affording your ridiculously expensive latte habit. A new homeowner, Alyssa brings her real-life knowledge of the Canadian real estate market and smart money matters to Zolo.ca